Now, before using EVM , you first need to put in place a structure so that Earned Value Methodology can be used.

This is relatively simple if you are familiar with breaking down your project into products and/or work packages, work packages that can be broken down into its component parts.

This procedure is called creating a Work Breakdown Structure (WBS). You then make a list of the activities that produce the products and sub-products. This post will not go into the details of creating a WBS. That can be the subject of another post.

Each activity is allocated a certain cost based on the resources to be expended on that activity. This is made easier if the organization follows some sort of Activity Based Costing accounting system. This is a more efficient and better way of tracking costs. It also aids in eliminating non-value adding activities and/or trimming costs. However, ABC is not rocket-science and you can easily pick up the nuances of assigning costs to activities.

Next the schedule for the activities is plotted to form the project plan. A good schedule takes into account the availability of the resources.

Earned Value Methodology is about tracking and monitoring the costs and schedules of this baselined plan.

First the schedule is updated with the completed work.

If the work can be sub-divided into discrete components or activities, then percentage completion can be allocated.

If the work cannot be easily divided, then the 50-50 rule is usually used i.e. the work is declared 50% complete on start and 100% on completion.

“Well-begun is usually half-done”. Something to remember!

Next costs are allocated to the activities. Note these are the actual costs incurred and not the budgeted costs.

Next we go about calculating the earned value of the product.

Earned Value (EV) is simply percent complete * Planned Value (PV). It simply states what proportion of the Planned Value is achieved.

Earned Value may or may not be equal to Actual Cost (AC). If EV = AC , then the cost variance (CV) is 0.

CV = EV – AC. If CV is +ve , then costs are under control.

The Cost Performance Index (CPI) is the ratio of the Earned Value/Actual Cost. If CPI > 1 , then costs are under control.

Schedule Variance (SV), on the other hand, is Earned Value – Planned Value. If SV > 0, then schedule is under control.

The Schedule Performance Index (SPI) is the ratio of the EV to PV. If SPI > 1 , then the schedule is being adhered to.

Earned Value Methodology seems to draw its inspiration from Variance Analysis, a form of Management Accounting.

Of course, when using the above two metrics in a Project Management dashboard, none of which can be tackled in isolation, but have to be taken together to be able to present a better picture to the project sponsor and project board the progress of the project. These metrics are more understandable to them and a quick glance at these metrics is all that’s required to grasp as to whether the project is on schedule and on budget. Time is precious and theirs more than yours!

The next installment in this series will focus on how to make an informed estimate of the completion of the project and the expected actual cost.

Sporting posts from my other blog: Sporting Time(s) - Make Time For Sports

Zlatan Ibrahimovic considers himself a towering personality. I took the opportunity to take a selfie with myself at the Grevin Museum in Paris. The one to the right is made of wax and the one to the left is made of steel. A photo posted by IAmZlatan (@iamzlatanibrahimovic) on Feb 9, 2015 at 1:45pm PST […]

Kapil Dev eggs on the Indian cricket team to greater heights. What he said: “Well I have never understood this team hug inside the ground at start of the match. What were you guys doing in dressing room. Only eating eggs!” Former India player and World Cup winning skipper Kapil Dev is realistic about Team India’s […]

Supreme justice for N Srinivasan. What they said: “Individuals are birds of passage while institutions are forever.” The Supreme Court bench of Justices T S Thakur and F M I Kalifulla read N Srinivasan his rights in a ruling that effectively prevents him contesting for the BCCI top post. The judges ruled out any person having a […]

Anil Kumble theorises. What he said: “We have gone into this theory of three seamers and one spinner the moment we sit on an aircraft which travels more than seven hours.” Anil Kumble is convinced that not much thought goes into the selection of the bowlers in overseas Tests outside the subcontinent. He said: “We have […]

Tony Abbott says cricket is about ‘drinks’. What he said: “The safest place to put your beer when I was playing was behind the stumps, particularly when I was bowling.” Australian premier Tony Abbott confesses that the only reason he took up cricket at Oxford was for the availability of drinks at odd times. He […]

Too often, we wait. We wait to get the gig, or to make the complex sale, or to find the approval we seek. Then we decide it's time to get to work and put on our show. The circus doesn't...See it on Scoop.it, via Finance, Economics and Management

It is limiting to focus on the similarity of volunteers and employees. Think of what we might accomplish if volunteers had free rein to make the most of what distinguishes them from a paid work force.See it on Scoop.it, via Finance, Economics and Management

Indian team's irregular sessions may have surprised many but Dhoni feels that it is better to do three days of "high intensity" training rather than six days of "mediocre" workout.See it on Scoop.it, via News and Analysis

After Sri Lanka became the sixth side to chase down 300-plus in World Cups, ESPNcricinfo looks back at the other five occasions and discovers Ireland well to the fore - Cricket feature story from ICC Cricket World Cup 2015...See it on Scoop.it, via News and Analysis

Bangladeshis in huge numbers paid tributes to slain American blogger Avijit Roy on Sunday as they criticized the government for its failure to ensure safety to the writer, known for his critique of religious extremism.See it on Scoop.it, via News and Analysis

I was once interviewed for an article on Fox News Los Angeles, the author of which finds herself immersed in the LA dating scene (which, as you can imagine, is unique). We discussed some recent exp...See it on Scoop.it, via Science, Health and Technology

It has been said life is equal parts what happens to us and how we process what happens to us. I think that is very true in gymnastics. The attitudes and beliefs that a gymnast has about herself an...See it on Scoop.it, via Lead, Follow,Grow

When you make your customer feel stupid, you've given him no choice. He needs to blame you. Some ways to make people feel stupid: Charge different prices at different outlets and shrug your shoulders when you get found out. Insist...See it on Scoop.it, via Lead, Follow,Grow

Recently in a workshop, I asked the group how many people thought Twitter was "stupid", to which had seen several hands raised. I followed up with the question, "How many of you think it is benefi...See it on Scoop.it, via Lead, Follow,Grow